Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Franchise Dangers - Why Buying a Business Franchising is a Bad Deal

Personal_Finance / Business Dec 11, 2013 - 10:29 AM GMT

By: BATR

Personal_Finance

The most often cited reason to go into business is to make money. At least that is what you are supposed to believe. If that was the only motivation, there are many other options to turn a quick buck and avoid all the pit falls and responsibility of making a payroll. For the brave of heart and persistent of will, starting your own business is a dream come true. Therefore, at first look, it seems reasonable to follow a pattern of a proven winner, when the leap requires putting your entire net worth on the line. Franchising has the appeal of lessening the odds of failure, to the uninitiated.


Risk is a financial condition that few appreciate until their feet are held to the fire. Entrepreneurs strive for the best business they can build, while an investing licensee wants to buy into a formula that has a track record with a guaranteed return. Why else would anyone be willing to pay a substantial fee and share profits to put up a sign?

Jonathan Lister of Demand Media, cautions the perspective businessperson, accordingly about business operation constraints in Negative Effects of Licensing & Franchising.

"The parent company or franchisor you sign a franchise agreement with has the right to control a large portion of your operational decisions, including setting prices for goods or services, determining location decor, and mandating employee uniform requirements. These constraints rob you of the chance to put your own stamp on your franchise location. This may make you feel like less of a small-business owner because you don't truly have total control over your company. In the end, you have to adhere to the parent company's demands to preserve your franchise agreement."

Also, consider the cost of franchise fees.

"Making regular payments based on a percentage of your revenue from sales is a routine requirement as part of a franchise agreement. This means you don't get to keep 100 percent of your revenue regardless of how high or how low your sales are for any particular month, quarter or year. These regular payments can damage your franchise location's ability to pay bills and sustain growth if sales are slow when you open for business. The parent company may also charge you a one-time franchise fee to secure the rights to use the franchise's name and reputation in building your business."

Such constrains drive away and offend true enterprise warriors. However, in an economy that rewards bean counters and legal wizards, more than dedicated hard working ownership, the model of the franchise business came into being. Bankers love this prototype, as they shun lending to individuals and family businesses.

It is a mistake to believe that only shrewd, sophisticated and experienced business capitalists sign-up for a franchise license. Joel Libava bills himself as a top franchise ownership advisor. He lists eight stupid reasons for buying a franchise business, where you can examine his reasoning on each point.

1. You can’t get a job.

2. It’s hot!

3. There’s a prime location open right by your house.

4. You’re in love.

5. Your Aunt Tillie and Uncle Mort, just back from their 28-day cruise, mention "this restaurant" they ate at in Barbados.

6. You’ve always wanted to be an entrepreneur.

7. You read something either online, or in a magazine that said, "you should really take control of your life now."

8. You’ve finally found a business partner.

OK, so you are smart enough to avoid the trap of emotional sentiment and you have the good sense to hook up with a flagship name company. What is the price for such peace of mind?

According to the Wall Street Journal, you better read the fine print in your contract. "Franchisees typically sign lengthy agreements that require them to follow the rules of the franchiser, which commonly require arbitration to resolve a dispute, thus restricting their ability to file individual lawsuits."

Probably the most ignored area of business is the fact that legal obligations and exposure to litigation is constant. So are you better off with a franchisee agreement that imposes binding arbitration based upon a contract written to protect the interests of the franchisor?

Making a business decision on the merits of potential profitability of the venture is common to any endeavor of commerce. However, the added burden of becoming a glorified manager for the parent company seems less than prudent. The kicker is that you risk your own money and agree to satisfy all the bills, before you can take home your first dollar of compensation.

This may be rhetorical, but if you are reading Franchising For Dummies, you are a pinhead.

 Seek advice from only those franchise lawyers and consultants who have a serious depth of experience in franchising.

 Don't assume you have any rights not stated under the franchise agreement.

 Consider your exit strategy.

 Be careful of what you may guarantee.

 Know a franchisor’s rules before investing if you want to own a separate business.

 Get everything in writing from the get-go.

 Carefully read Item 11 in the FDD.

 Make sure you understand the boilerplate in the agreement.

 Know the difference between a franchise broker and a consultant or advisor.

What are you getting yourself into? Do you really need to jump through all these hoops before you get down to the serious task of working a business?

Negotium advocates the merchant economy and by definition, a merchandiser in a commercial enterprise is selling a product, service or an idea. Buying from a supplier may require a contract, but a sole proprietor does not need permission to engage in commerce.

When the consumer patronizes a franchise operation, they are contributing to the demise of an independent and a middle class ownership economy. Boycotting international named brands is a step forward in restoring a prosperous and widely shared shopkeeper economy. Dump the ad hype and buy from local merchants.

James Hall – December 11, 2013

Source : http://www.batr.org/negotium/121113.html

Discuss or comment about this essay on the BATR Forum

http://www.batr.org

"Many seek to become a Syndicated Columnist, while the few strive to be a Vindicated Publisher"

© 2013 Copyright BATR - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors

BATR Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in